Plans for three "luxury" family homes in the Royal Free's old mental health building in Lyndhurst Gardens were approved on Thursday.

Planning committee chair Cllr Heather Johnson used her casting vote to approve the scheme after the committee was deadlocked at four votes in favour, four against, and two abstentions.

Developer Jaga Developments is to convert the listed building - formerly known as The Hoo - into two five-bedroom homes and one four-bedroom home.

After disputes over the value of the land at the site, the developer said it accepted it would pay a higher community infrastructure levy (CIL) fee as part of the plans. But it said this and other rising costs meant providing an up-front affordable housing contribution was "not viable".

Speaking against the scheme, Cllr Anna Wright (Lab, Highgate) queried why the developer was able to quote high fit-out costs as a reason for this.

She said: "We are in a bizarre situation where we are in a circular argument – where the more extravagant a development is the less responsibility there is to contribute to affordable housing – and it ought to be the opposite."

Cllr Oliver Cooper (Con, Hampstead Town) shared similar concerns, saying: "If the building is not producing sufficient profit to deliver on the planning policy set by the council, the developer should not be bailed out by this committee."

Cllr Danny Beales said the town hall had to abide by planning policy, though he did ask whether a "different approach" was possible.

Andrew Jones, a surveyor who conducted an independent viability assessment, told the committee: "There's a close correlation between what you spend in terms of the development, and the quality of that development and the end prices you can achieve."

Camden officer Bethany Cullen told the committee she shared councillors' frustrations, but said the town hall would be "stepping beyond our role" were it to tell a developer to reduce the standard of a development in the way suggested.

Cllrs Danny Beales, Marcus Boyland, Adam Harrison and Heather Johnson voted in favour of the scheme, and Cllrs Jenny Mulholland and Peter Taheri abstained. Cllrs Oliver Cooper, Lazzaro Pietragnoli, Flick Rea and Anna Wright voted against.

If the developer does make more than anticipated income on the development, a proportion of this will be held as an affordable housing contribution.